Hello. I'm 62. Pulled funds out of an IRA. We had 10% federal and 10% state taxes withheld, (Montana) Our tax bill went up a lot. Filed the forms. Tax bill was huge.

[linehand34]

This money was included with our regular income. Looks like 10% tax withheld wasn't enough. Is this correct? Thanks

[Hal_Al · Accepted solution]

Yes, that is not unusual. IRA distributions are taxed as ordinary income (not at capital gains rates). Most importantly, it is added to other income and pushes you into higher tax rate  brackets*. The higher income can sometimes reduce or eliminate other tax benefits, e.g. Earned Income credit.

*The 10% bracket ends at $18,550 taxable income for a married couple.